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Construction Mark-Up vs. Margin
Mark Up and Margin are confusing terms in the construction contracting industry. It seems as though there is a slight bit of difference but the concepts produce widely different results. If you care about profits then, you should be interested.
Let's look at the how they can affect our profit and thus, our wealth building.
Mark-up is profit percentage as a factor of cost. Cost is the basis for the profit calculation. As an illustration, if we have a $100 of cost and want to make a 10% margin then, we multiply .10 by $100 and add the result - $10 - to our cost of $100. Our price to the client is $110.00. we have all have performed the math thousands of times and there is no mystery. Most professionals were taught this as the only way to calculate profit.
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Matt Stevens is a management consultant who works only with construction contractors. He has performed training and business consultation for the contracting community since 1994. Matt can be reached at mstevens@stevensci.com.">mstevens@stevensci.com.
search terms: Pre-construction, post-mortem, lessons learned, Financial Managemet, Accounting, Costing, Pricing, Bidding, Overhead Recovery, profit margin, mark up
Posted by Matt Stevens at October 16, 2005 2:04 AM
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Comments
Thanks for sharing this information. The difference needs to be considered when claims are made so I pointed to your post at my blog.
Posted by: Robert Williamson(Owners and Builders Law Blog) at November 15, 2005 7:09 PM
Please send me Mark-up vs Margin.
Thank-you.
Posted by: Steve Kemp at January 2, 2006 8:23 PM
Thanks!
Posted by: Michael at May 12, 2006 4:57 PM